Supco rules in favor of state for Bresnan taxes

HELENA (AP) — The Montana Supreme Court has ruled in favor of the state Revenue Department in a dispute over how Bresnan Communications property is assessed for tax purposes.

The decision increases the company's taxes from $1.7 million in 2009 to $7.3 million in 2010, a 329 percent increase.

Bresnan is now owned by Charter Communications LLC. Spokeswoman Anita Lamont tells Lee Newspapers of Montana that the company is extremely disappointed in the high court's decision.

"This determination to retroactively raise Bresnan's taxes more than 300 percent creates an alarming precedent," Lamont said.

Bresnan, which owned the company from 2002-2010, had historically divided its property between the tax assessment classifications for a "cable television system" and a "telecommunications services company" that included its Internet and phone services.

The Department of Revenue began auditing Bresnan's reporting in late 2008. The agency eventually determined Bresnan should have classified all of its property as a telecommunications company starting in 2007 and issued revised assessments for 2007 through 2009. Bresnan paid parts of the revised assessments under protest.

Bresnan challenged the re-classification and the reassessments.

Last year, District Judge Susan Watters ruled that Bresnan's properties should continue to be split between two tax classifications — a 3 percent rate for cable television and a 6 percent rate for telecommunications and ordered the state to refund the taxes paid under the retroactive assessments.

The department appealed that decision.

The Supreme Court overturned Watters' decision in a 5-2 ruling issued Monday, saying Bresnan's business has changed, meets the definition of telecommunications services under state law and should be taxed at the higher rate.

"An analysis of the use and productivity of Bresnan's entire network results in the inescapable conclusion that Bresnan uses a single transmission line to deliver three separate services," Justice Brian Morris wrote for the majority.

State Revenue Director Mike Kadas said the department is pleased with the ruling.

"Over the years, the company's business has evolved from a one-way cable TV operation to a telecommunications services company, offering voice, video and Internet," Kadas said. "Under Montana law, this change in Bresnan's business operations requires the department to reclassify Bresnan's property as that owned by a telecommunications services provider."

Justice Jim Rice dissented, saying that Watters' decision noted that other companies' property is taxed in multiple classes and found that the overwhelming use of Bresnan's property is to provide one-way transmission of video signals.

Rice called the decision a disincentive for companies to expand their telecommunications services.

"It should be called highway robbery — perhaps the first case of information superhighway robbery by the tax authorities," Rice wrote.

Justice Laurie McKinnon joined the dissent.